58 LV= Annual Report 2012
Notes to the Financial Statements
31 December 2012
Significant accounting policies 1.2 Significant accounting estimates and judgements
This section describes the LV= Group’s significant accounting The preparation of financial statements in accordance with IFRS
policies and accounting estimates that relate to the financial requires the use of estimates. It also requires management to
statements and notes as a whole. If an accounting policy or an exercise judgement in applying the accounting policies. The key
accounting estimate relates to a specific note, the applicable areas involving a high degree of judgement or complexity, or areas
accounting policy and/or accounting estimate is contained where assumptions are significant to the financial statements are
within the relevant note. highlighted under the relevant note.
1. Significant accounting policies Significant accounting estimates and judgements are disclosed in:
1.1 Basis of presentation
The Group financial statements consolidate the results of l Fair value of financial assets (Note 15)
the Society and its subsidiary companies. The Group’s and l Insurance contract liabilities (Note 21)
l Goodwill and intangible assets (Note 26)
Society’s financial statements conform to International Financial
Reporting Standards (IFRS) and interpretations issued by the IFRS l Pension benefit asset/(obligation) (Note 39)
Interpretations Committee (IFRIC) as published by the International
Accounting Standards Board and adopted by the European Union. 1.3 Accounting policies
In addition the Society’s financial statements comply with the a. Consolidation
Friendly Societies (Accounts & Related Provisions) Regulations Subsidiaries
1994 (the Regulations). Subsidiaries are all entities, including Open Ended Investment
Companies (OEICs), over which the Group (directly or indirectly)
In accordance with IFRS 4 on Insurance Contracts, the Group has has the power to govern the financial and operating policies
applied existing accounting practices for insurance contracts and generally accompanying a shareholding of more than one half of
participating investment contracts modified as appropriate to the voting rights. The existence and effect of potential voting rights
comply with the IFRS framework and applicable standards. that are currently exercisable or convertible are considered when
Further details are given in accounting policy 1.3b below. assessing whether the Group controls another entity. Subsidiaries
are fully consolidated from the date on which control is transferred
Insurance contracts are accounted for in accordance with the
to the Group using uniform accounting policies consistently
Statement of Recommended Practice issued by the Association
applied across the Group. They are excluded from consolidation
of British Insurers in December 2005, and amended in December
from the date on which control ceases.
2006. In certain businesses, the accounting policies or accounting
estimates have been changed, to measure designated insurance
The Group uses the purchase method of accounting to account
liabilities using current market interest rates and allowing for other
changes to regulatory reporting practices. The Group measures for the acquisition of subsidiaries. Accordingly, the cost of an
the liability on insurance and with-profit contracts in line with the acquisition is measured as the fair value of the cash or other
‘realistic’ reporting regime of the Financial Services Authority assets given, equity instruments issued and liabilities incurred or
(FSA). More detail on the valuation of insurance and investment assumed at the date control passes. Identifiable assets acquired,
contracts is given in the accounting policies disclosed within liabilities and contingent liabilities assumed in a business
Notes 17 and 21. combination are measured initially at their fair values at the
acquisition date, irrespective of the extent of any minority interest.
The financial statements have been prepared under the historical The excess of the cost of acquisition over the fair value of the
cost convention as modified by the revaluation of investment Group’s share of the identifiable net assets acquired is recorded
properties and financial assets and liabilities (including as goodwill. If the cost of acquisition is less than the fair value
derivatives) at fair value through income. of the net assets of the subsidiary acquired, the difference is
recognised directly in the Statement of Comprehensive Income for
The principal accounting policies applied in the preparation of the period.
these consolidated financial statements are set out below.
These policies have been consistently applied to all years Intra-group transactions, balances and unrealised gains on
presented, unless otherwise stated. intra-group transactions are eliminated on consolidation.
Unrealised losses are also eliminated unless the transaction
After making enquiries, the directors have a reasonable
provides evidence of an impairment of the asset transferred.
expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future. The Group
Where the Group invests in specialised investment vehicles
therefore continues to adopt the going concern basis in preparing
(such as OEICs) and owns greater than 50% of the unit
its consolidated financial statements.
shareholding, they are consolidated. The interests of other parties
Restatements in these vehicles will be classified as liabilities and appear as
The Statement of Comprehensive Income has been restated to ‘Net asset value attributable to external unit holders’ because
reclassify interest on loans secured on residential property from they are puttable instruments. The external unit holders’ share
Fee and commission income to Investment income. of the net investment return on the OEICs is charged or credited
to the Statement of Comprehensive Income as investment return
The Statement of Financial Position and Statement of Cash Flows allocated to external unit holders.
have been restated to gross up Bank balances and Other financial
liabilities to reflect cash collateral received. Details of the Society’s principal subsidiaries are given in Note 43.